Description:
<jats:title>Abstract</jats:title><jats:p>Traditional and dynamic investment models were estimated using farm‐level dairy data. The traditional model predicted more variability in desired capital and less variability in the adjustment rate than did the dynamic model. Overall the traditional model performed better. Both models suggest a significant delay between changes in the determinants of desired capital stock and the actual investment expenditure. New York dairy farmers may be making more extensive use of existing capital before making additional expenditures. Another explanation may be our use of farm‐level data where investment is periodic and discrete. Most other studies have used aggregate data.</jats:p>